Harry Browne / Fail-Safe Investing

Prologue

Keep It Safe and Simple

The investment world can seem to be a mysterious place - filled with moving averages, IPOs, reverse spreads, stochastics, a "Footsie" index, the Fed "injecting" and "draining" liquidity, and more ratios than you might care to hear about.

I entered that world in the 1960s and set out to understand it all. But the more I learned about sophisticated techniques, supposedly savvy strategies, and the secrets of the very rich, the more I came to understand that the real secret of investing is just this:

Keep it safe and simple.

This book will show you how to do so - how to handle your investments with minimum effort and no worry, and yet make sure your wealth (however large or small) is safe and growing.

Two Worlds?

You earned the money you've accumulated by using common sense to provide a service others were willing to pay for.

Most likely, that same resource of common sense has led you as well to friendships, romance, and the emotional maturity that allows you to enjoy life.

Wherever you go, whatever new challenge or problem you face, you fall back on your common-sense understanding of how the world works. You should be able to use that understanding in investing just as well.

But many - if not most - financial experts and advisors talk as though the investment world were somehow different from the rest of life. They divine the future from lines and squiggles on charts, as though they were witch doctors examining entrails. Or they base their strategy on mob psychology, as though human beings were all dunderheads who can't think for themselves.

This is where the trouble begins. You can easily think you've entered a parallel universe controlled by prophecy, mysterious symbols, obscure cycles, and strange ideas about how human beings behave - everything you'd shun if 2 Harry Browne / Fail-Safe Investing 2 the topic weren't investing, and if the hope of big gains didn't cloud your common sense.

Such strange ideas about how the investment world works can divert you from the simple, straightforward principles that have led to your success in everything else you've done.

In truth, the investment world is a part of the same world you already know and deal with successfully. And your common sense is far more valuable to you than all the jargon, analyses, and trading systems you hear about.

The 17 Simple Rules

Unlike most investment books, this one won't teach you a secret theory of investing. Instead, it presents 17 simple rules that will remind you of what you already know and give you the confidence to act on that knowledge.

These rules will protect you against the unreality prevalent in so much writing and conversation about investing. The rules will assure that your investments will enhance your life and will grow into a safe and comfortable retirement. And they will make certain you don't lose your hard-earned money.

The rules won't make you privy to the secrets of the world's greatest speculators - but nothing else you read will do that either.

Your reaction to some of the rules may be "Of course, that's obvious." But the obvious is precisely what you must cling to - and it's what too many financial writers will try to separate you from. Danger lurks wherever you reach for exotic and complicated concepts - disregarding the plain truths that have brought you this far in life.

In Part I, we will look at the 17 rules. Since most of them are largely selfevident, they require very few words to explain. You can read through all the rules in 60 minutes or less.

Part II provides background information and some not-so-obvious examples of heeding or ignoring each rule. Refer to Part II for more explanation if you need it.

While the rules are largely warnings to exercise prudence, they won't stop you from making profits. They even leave room for trying to strike it rich with part of your money, if that's what you want to do. But their first job is to keep you from making any mistake that could be financially fatal.

In truth, many of the rules aren't that different from the ones your mother tried to teach you:

"Don't trust strangers."

"Don't put all your eggs in one basket."

"Don't take all your savings to the amusement park."

"Don't get into situations you can't get out of."

And my all-time favorite Advice-from-Mother:

"If all your friends drove off a cliff, would you have to do it, too?"

You've used some of these rules successfully in other parts of your life. Now it's time to apply them to your investments.

Investing doesn't have to be difficult, dangerous, complicated, or mysterious. It demands only that you relax and keep your head, that you approach the investment world in the same way you've handled the rest of your life - even if everyone you know chooses not to.

These rules are by far the most important truths I've learned in my 35 years in the investment world. They have made money for me, they have kept my investments safe, and they have made my investment life simple.

In the next 60 minutes you'll have the benefit of my 35 years' experience, so the rules can do the same for you.

"Everything Browne writes merits the closest attention, and in this, his self-proclaimed last book on investing, he here presents a sort of summa of the common-sense wisdom he has garnered from thirty years of watching the rise and fall of markets - and he does so with his customary directness, clarity, and humility. He remains in a class by himself, and many of us will always be in his debt for the uncommon ideas he has expressed so ably. And above all for his own example - for the standard he has set."